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Palestinian President Mahmoud Abbas on Tuesday rejected an Israeli peace proposal, which included withdrawal from 93 percent of the West Bank, because it does not provide for a contiguous Palestinian state with Jerusalem as its capital.

Nabil Abu Rdainah, Abbas's spokesman, told the official Palestinian news agency WAFA that Prime Minister Ehud Olmert's plan showed a "lack of seriousness."

Under the proposal, Israel would return to the Palestinians 93 percent of the West Bank, plus all of the Gaza Strip, when the Palestinian Authority regains control over the Gaza Strip, which the militant group Hamas seized from forces loyal to Abbas in June 2006.

Olmert presented Abbas with the proposal as part of an agreement in principle on borders, refugees and security arrangements between Israel and a future Palestinian state.

In exchange for West Bank land that Israel would keep, Olmert proposed a 5.5 percent land swap giving the Palestinians a desert territory adjacent to the Gaza Strip.

Olmert's proposal first emerged several months ago and was published in detail on Tuesday by Haaretz, prompting Abu Rdainah's response.

"The Israeli proposal is not acceptable," Abbas's spokesman said. "The Palestinian side will only accept a Palestinian state with territorial continuity, with holy Jerusalem as its capital, without settlements, and on the June 4, 1967 boundaries."

He called the Israeli proposal a "waste of time."

Olmert spokesman Mark Regev said the Olmert was serious about continuing the peace talks.

But another Israeli official said Olmert was merely trying to establish his legacy. "There is going to be no agreement, period," he said on condition of anonymity.

Olmert, who met with Abbas this week, feels there is time to reach an agreement during his remaining time in office. Two weeks ago, Olmert announced that he would not participate in the upcoming primary election within his Kadima Party and that he would step down from his post when his successor is named.

The centerpiece of Olmert's detailed proposal is the suggested permanent border, which would be based on an Israeli withdrawal from most of the West Bank. In return for the land retained by Israel in the West Bank, the Palestinians would receive alternative land in the Negev, adjacent to the Gaza Strip. The Palestinians would also enjoy free passage between Gaza and the West Bank without any security checks, the proposal says.

A senior Israeli official said the Palestinians were given preliminary maps of the proposed borders.

Under Olmert's offer, Israel would keep 7 percent of the West Bank, while the Palestinians would receive territory equivalent to 5.5 percent of West Bank. Israel views the passage between Gaza and the West Bank as compensating for this difference: Though it would officially remain in Israeli hands, it would connect the two halves of the Palestinian state - a connection the Palestinians did not enjoy before 1967, when the Gaza Strip was under Egyptian control and the West Bank was part of Jordan.

The land to be annexed to Israel would include the large settlement blocs, and the border would be similar to the present route of the separation fence. Israel would keep Ma'aleh Adumim, Gush Etzion, the settlements surrounding Jerusalem and some land in the northern West Bank adjacent to Israel.

Since Olmert and Defense Minister Ehud Barak recently approved more construction in both Efrat and Ariel, two settlements relatively far from the 1949 armistice lines, it is reasonable to assume that Olmert wants to include these settlements in the territory annexed to Israel as well.

Olmert's proposal states that once a border is agreed upon, Israel would be able to build freely in the settlement blocs to be annexed.

The settlements outside the new border would be evacuated in two stages. First, after the agreement in principle is signed, the cabinet would initiate legislation to compensate settlers who voluntarily relocate within Israel or to settlement blocs slated to be annexed. Over the past few months, Olmert has approved construction of thousands of housing units in these settlement blocs, mostly around Jerusalem, and some are intended for the voluntary evacuees.

In the second stage, once the Palestinians complete a series of internal reforms and are capable of carrying out the entire agreement, Israel would remove any settlers remaining east of the new border.

Olmert will to try to sell the deal to the Israeli public based on a staged program of implementation. The present negotiations, which started with the Annapolis Summit in November 2007, are intended to reach a "shelf agreement" that would lay the foundations of a Palestinian state. However, implementation of the shelf agreement would be postponed until the Palestinian Authority is capable of carrying out its part of the deal.

Olmert's proposal for a land swap introduces a new stage in the arrangement: Israel would immediately receive the settlement blocs, but the land to be transferred to the Palestinians and the free passage between Gaza and the West Bank would only be delivered after the PA retakes control of the Gaza Strip. In this way, Olmert could tell the Israeli public that Israel is receiving 7 percent of the West Bank and an agreed-upon border, while the Israeli concessions will be postponed until Hamas rule in Gaza has ended.

Abbas, for his part, could tell his people that he has succeeded in obtaining 98 percent of the West Bank from Israel, along with a promise to remove all settlers over the border.

The Palestinians' proposal had talked about a much smaller land swap, of about 2 percent of the West Bank.

Compared to previous Israeli-Palestinian negotiations, the Olmert proposal falls between the one then prime minister Barak presented to Yasser Arafat at Camp David in July 2000 and the one he offered at Taba in January 2001. The Palestinian proposal is similar to the ones offered during the Arafat years, which would have allowed Israel to annex only a few settlements, along with their access roads - a proposal nicknamed "balloons and strings." All these Palestinian proposals ruled out allowing Israel to retain the settlement blocs.

Since then, however, the separation fence has been built in the West Bank, and a new physical reality has been created in the areas where the fence has been completed.

Israel also presented the Palestinians with a detailed model of new security arrangements under the proposed agreement. The security proposal was drawn up by a team headed by Maj. Gen. Ido Nehoshtan, now commander of the Israel Air Force, but previously head of the army's Plans and Policy Directorate. The proposal has also been passed on to the Americans, in an effort to obtain their support for Israel's position during the negotiations.

The security proposal includes a demand that the Palestinian state be demilitarized and without an army. The Palestinians, in contrast, are demanding that their security forces be capable of defending against "outside threats," an Israeli official said.

On the refugee issue, Olmert's proposal rejects a Palestinian "right of return" and states that the refugees may only return to the Palestinian state, other than exceptional cases in which refugees would be allowed into Israel for family reunification. Nevertheless, the proposal includes a detailed and complex formula for solving the refugee problem.

Olmert has agreed with Abbas that the negotiations over Jerusalem will be postponed. In doing so, he gave in to the Shas Party's threats that it would leave the coalition if Jerusalem were put on the negotiating table.

Olmert views reaching an agreement with the Palestinians as extremely important. Such an agreement would entrench the two-state solution in the international community's consciousness, along with a detailed framework for achieving this solution. In Olmert's opinion, this is the only way Israel can rebuff challenges to its legitimacy and avoid calls for a "one-state solution." Such an agreement would show that Israel is not interested in controlling the territories, or the Palestinians, over the long run, but only until conditions arise that enable the establishment of a Palestinian state. This position has received strong support from the present U.S. administration.

Next week, Secretary of State Condoleezza Rice will visit the region to continue her efforts to advance the negotiations. However, Olmert opposes her proposal to publish a joint U.S.-Palestinian-Israeli announcement detailing progress in the negotiations since Annapolis. Olmert objects to publishing partial positions; he only wants to announce a complete agreement - if one can be reached.